Jindal inks law to end retirement 'loophole"

Jul. 3, 2010

Written by

Gannett Capital Bureau

BATON ROUGE -- A new state law seeks to close a loophole that has both helped and harmed school systems and increased debt in the Teacher Retirement System of Louisiana.

Gov. Bobby Jindal on Friday signed into law HB519 by Rep. Page Cortez, R-Lafayette, which closes the door, with some exceptions, on the overused "retire-rehire" provision in state law.

It's estimated to save the state at least $108 million and school systems $94.2 million a year in five years. Savings this year are estimated at $21.6 million for the state and $18.8 million for school systems.

Until the law was changed, any TRSL participant -- including some no longer employed in the school system -- could retire one day, stay out a day before coming back to work at full pay and a year later start collecting retirement benefits and salary.

"It's all about keeping the system sound," Cortez said. "It was beginning to be bled by people taking advantage of that provision."

The latest report showed TRSL had a $16 billion unfunded accrued liability on June 30, 2009, Cortez said, but the new report should show a much smaller debt because of improvements in investments.

While retire-rehire helped school systems secure certified teachers, it also cost them because the state and local share of employee benefits paid to experienced teachers is higher than that for new hires.

Records show that when retire-rehire was first established to lure retired teachers for hard-to-fill teaching slots in rural schools, no more than 3,000 teachers took advantage of the offer. Currently, 7,500 TRSL participants are in retire-rehire, and 2,500 of those are in non-classroom jobs.

There's still a small loophole in the bill that Cortez says is needed in extreme cases.

The law says non-retirees shall be given hiring preference over retirees, but it allows the superintendent and the personnel director to utilize retire-rehire if they declare a critical shortage.

If a school system cannot get at least three qualified and certified teachers to apply for a position after advertising two times, a shortage can be declared. The superintendent and personnel director certify in a report to the Board of Elementary and Secondary Education and to TRSL that rehire-retire was necessary.

HB519 makes several changes, including prohibiting retire-rehire for administrators and limiting it to K-12 classroom teachers.

The definition of classroom teacher is any certified full- or part-time educator and also includes any certified and licensed speech therapist, speech pathologist or audiologist, so retire-rehire also could be used in any school district where a shortage of persons to fill those positions exists.

"It puts it back the way the original law was intended," Cortez said, so he believes those instances will be rare.

"The way it was before, anybody in TRSL -- superintendents, clerical workers, business managers and even people in higher education -- could do it," he said.

The most prominent example is former Commissioner of Higher Education Sally Clausen, who ended up actually retiring amid criticism of her decision to exercise the option. She collected $90,000 in unused leave and sick pay but was not eligible for retirement benefits until August.

Cortez says the bill doesn't prohibit any retiree from coming back to fill any administrative or non-critical teaching position.

"They just have to suspend their retirement pay," he said. "If they want to collect salary and retirement, too, they can go to work at a private school."

Dana Vicknair, assistant director of TRSL, said there's also a provision that says if an employee once participated in retire-rehire and actually retired, the employee could return to work and continue collecting salary and benefits.

"We have been getting inquiries from members and employers wanting information" about HB159, said Lisa Honore of TRSL. Most of them are "'how would it affect me' or how it affects agencies."

The new law does not affect school employees currently under retire-rehire.

A provision under the new law says that neither the state nor school system has to pay into the retirement system for any new retire-rehire employees, and the employees cannot accrue additional benefits after being rehired.

"I think people are going to choose to keep working until their actual retirement date," Cortez said.

That's also the belief of Rep. Joel Robideaux, I-Lafayette, who authored legislation that says any state employee cannot collect full benefits until age 60.

"They can retire before 60 but at a lower rate," Robideaux said, so he believes employees will choose to keep working and building up their retirement pay.

Robideaux's HB1337, which affects employees hired after Jan. 1, 2011, has not yet been signed into law. It calls for the establishment of two types of retirement systems -- regular and hazardous duty -- and establishes guidelines from contributions and benefits.